Benefits 2.0: what employees want from their retirement plan

next issue no. 12

Nuveen has commissioned Economist Impact to conduct research into the future of corporate benefits. The study covers a range of benefits, including retirement programs, health insurance, life/disability insurance, paid time off, wellness, family support (e.g., parental leave, childcare, elderly care and family planning) and education and training. Through the survey, more than 1,500 people from industries across the country and various seniority levels were interviewed to gain their perspectives on what their companies offer and how benefits should continue to evolve.¹

Benefits have become a key element to attracting and retaining talent, so it’s important for employers to ensure their benefits package remains attractive to new recruits and existing workers. The research shows that the benefits priorities of workers vary greatly across age, seniority, race and gender.

Overall benefits priorities

Across the entire survey, 25% of respondents ranked retirement benefits as their top priority. Health/ life/disability insurance was a close second at just over 20%.

However, the data becomes revealing once we begin drilling down into the various sub demographics of the respondents. For example, by age breakdown, only 2% of Gen Z ranked retirement benefits their top priority. Instead, over 44% of the youngest cohort ranked education and training benefits as their top priority, and paid time off as their second highest priority.

The data shifts as we age up: 16% of millennials rank retirement benefits as their top priority, while 53% of Gen X and baby boomers rank retirement as their top choice.

With such drastic differences just on the simplest measure, the age of the participant, we can already see the challenges that a company faces when constructing benefits packages and balancing needs across the generations.

We see further splits when dissecting the responses by race. While nearly 30% of white respondents ranked retirement benefits as their top priority that number falls below 24% for Black, Hispanic and Asian workers. Instead, those groups place higher emphasis on education and training benefits. White respondents are much more likely to rank health, life and disability benefits highly, while Black and Hispanic respondents rank family planning and care higher than other cohorts do. While the splits are greater when divided by race than by generation, it shows how underlying priorities differ among workers.

Analyzing by seniority, we see stark divides between the upper management and the junior workforce. These differences are especially interesting. It is most likely the senior workers who are tasked with designing the overall benefits strategy for the organization, so they need to be careful to not allow their own preferences and priorities to drift into the organization’s overall benefits structure.

Nearly 60% of CxO and 46% of upper management rank retirement benefits as their top priority, while those same workers rank education and training and PTO benefits among their lowest priorities. When examining the other end of the corporate structure, junior workers are much more likely to rank education and training as their top benefit, with 38% doing so, and a further 26% ranking PTO second. Even among middle management workers, 23% rank education as their top want.

A closer look at retirement

The next stage of the survey drills into retirement benefits, inquiring what is offered to whom, overall satisfaction levels with the retirement benefits offered, and whether people would willingly switch jobs to chase better retirement benefits, if all else was equal. Breaking preferences out along categories of age, seniority, gender and race tells us that there is a wide range of what workers want from their benefits across organizations.

Satisfaction levels

By age, we see that people who are closer to retirement are generally more satisfied with their retirement plan offerings. When asked whether they are satisfied with their employer-sponsored retirement plan, only 14% of Gen Z say that they are strongly satisfied, while 56% are collectively somewhat and strongly satisfied.

For millennials, 28% report they are strongly satisfied, and 75% in total with somewhat satisfied. For Gen X / baby boomers, strongly satisfied climbs to 44% and 90% collectively with somewhat.

Whether this climb in sentiment as workers age is due to more familiarity with their overall retirement offerings, or just being more satisfied with the higher account balances that are likely to occur toward the end of a working life, requires further study.

Satisfaction regarding worker communication around retirement plans follows a slightly more predictable path, with those closer to retirement obviously receiving more communication from their employer around retirement planning. But there is a potential to increase communication with the younger workforce, as this could drive satisfaction and awareness levels of benefits that are available.

One major area of focus for plan sponsors and participants is to make sure clarity about retirement income is an integral part of retirement plans. While there is growing uncertainty about the future of Social Security payments being maintained at a fully funded level, we see relatively stronger certainty about retirement income by the older cohorts.

Among Gen Z respondents, 52% somewhat or strongly agree that they have enough clarity about how much income they will receive in retirement, which could be seen as an encouraging number seeing as many of this generation are still starting out in their careers. However, this jumps to 77% of millennials surveyed and 88% of Gen X / baby boomers.

By seniority, the most dramatic drop in satisfaction and overall knowledge about the amount of income that will be received in retirement is between upper and middle management. Overall satisfaction levels (those replying somewhat and strongly agree with satisfaction in their current plan) is north of 90% for more senior workers; this declines to around 70% for middle management, and then tumbles below 60% for junior workers.

The number who are somewhat or strongly dissatisfied climbs for junior workers to over 15%, while this percentage is below 5% for every other level of seniority in the survey. This indicates work needs to be done to help junior workers feel more satisfied with their retirement plan. Whether this is through plan structure and features such as employer contributions or whether it is through knowledge and communication remains to be seen.

Income certainty follows a similar path, although whether this relationship is causal (not knowing how much income will be received leads to lack of satisfaction) or due to a different factor is unknown. It shows again that junior workers are those who may need the most additional work at the firm, to ensure that they gain that certainty as to their retirement income, and hopefully become more satisfied with the retirement plan offered by the company.

Choosing jobs on retirement benefits

We know that benefits are an important consideration for people when choosing a new job, but the data also highlights how important retirement benefits specifically can be for different cohorts when choosing a job or considering a switch to a new job. Surprisingly, 39% of Gen Z disagree that retirement benefits are an important consideration when choosing a job. However, 53% of millennials consider a retirement program an important benefit when looking for a new job. These percentages only continue to grow as the potential jobseeker gets closer to retirement, with 74% of Gen X / baby boomers seeing retirement benefits as important. This generational shift is also seen when potential job seekers were asked if, all else equal, they would consider switching a job for better retirement benefits. Only 19% of Gen Z would do so, but this climbs to 34% for millennials, and 39% for Gen X and baby boomers. While the percentage of those willing to change jobs for retirement benefits alone is never a majority, that it goes from one-in-five of Gen Z, to at least a third of respondents for all other generations, shows that there is more willingness to chase better retirement benefits as a career develops.

By seniority there is an interesting divide, with many workers feeling relatively strongly one way or another, and few undecided neutrals. Of those with a CxO title, 46% disagree that better retirement benefits alone would be enough to get them to change jobs, while a relatively similar 41% agree with the statement. The numbers are almost identical for upper management, at 47% and 37%, respectively. For middle management the split is even closer, at 37% and 37% in each direction, with more undecideds making up the balance. It is only for junior workers that we see particularly strong data in any direction, with 57% disagreeing that retirement benefits alone would be enough to get them to change jobs, while 20% would consider doing so.

Curiously though, when reporting whether retirement benefits are an important consideration in choosing a job, we see much more enthusiasm across the seniority spectrum. Fully 73% of CxO-level respondents agree that retirement benefits are important when choosing a job, as do 74% of upper management. These numbers fall away slightly, with 50% of middle management seeing retirement benefits as important when choosing a job, while only 32% of junior workers feel so.

Different priorities, how to unify?

The data shows that the priorities of different workers across an organization can vary significantly. Even just splitting out the worker base along generational or seniority lines, we can see that there is no easy, one-size-fits-all solution that would generate the most enthusiasm across the spectrum. The role of a plan designer is to find the way to engage the participants at the level at which they find themselves. As workers age closer to retirement, or as employees become more senior within the organization, their needs and preferences are going to change.

The way the plan presents information needs to change with workers so the journeys align. Training and education are a major consideration for plan sponsors when communicating their benefits structures to workers. Educating on benefits according to worker demographics and seniority can allow for a dynamic benefits education throughout a career. On the surface, it should be relatively obvious that people change throughout their lives, but consideration should be given as to how their benefits desires are changing at the same time, and how communication from their employer aligns.